Updated: Sept. 28, 2011 at 3.45am ET
If it's the big picture you're after, Frankfurt is the only destination in Germany. Most German cities are low-rise, fashioned from timber, stone and brick, though concrete and steel have been widely deployed to plug gaps left by Allied bombing raids. But the city on the Main didn't just repair and restore. It reached for the sky, and in the process helped to power the Wirtschaftswunder, Germany's postwar economic miracle. "Bankfurt" or "Mainhattan," nicknames coined as shining towers rose up to accommodate the core of Germany's financial services industry, is home to the world's fifth largest stock exchange, the national or European headquarters of 218 banks, a thicket of hedge funds and major insurance companies and the Deutsche Bundesbank, Germany's central bank.
It was also the natural choice for the location of the headquarters of the European Central Bank (ECB), responsible for monetary policy in the euro zone and now struggling after emergency bailouts of Greece, Ireland and Portugal and amid fears over Italy and Spain and of Greek default - an economic pileup that threatens the existence of the European currency itself, and one which ECB president Jean-Claude Trichet has called "the worst crisis since World War II." Like that war, the crisis threatens havoc on a global scale, visiting destructive forces not only on Germany itself and the 16 other countries signed up to the euro but on the rest of Europe and Europe's largest trading partners, including the U.S. and China. (See 25 people to blame for the financial crisis.)
Now as then, Germany is at the epicenter. "The euro is much, much more than a currency. The euro is the guarantee of a united Europe. If the euro fails, then Europe fails," Chancellor Angela Merkel told her parliament on Sept. 7. But what Merkel has been more reluctant to acknowledge is that Germany, as the biggest player in the euro zone, has no choice but to determine the fate of the euro zone, whether by doing a lot or doing not very much at all. On Sept. 29, parliament will vote on expanding the bailout fund, raising Germany's contribution from $168 billion to $287 billion, almost half the total. The measure is expected to squeak through, but won't be enough to restore confidence and stability. That requires a fundamental change in the way the euro zone operates.
And Germany is in the hot seat. After two world wars in the first half of the 20th century, the European project tamed German national ambitions. Saving the project appears to require Germany to do the very things the E.U.'s creators aimed to prevent: take a dominant role in Europe and stamp out many remaining national quirks. For the euro to survive, the thinking goes, the profligate peoples of the weaker euro zone countries have to be made to behave like sensible Germans. "It was expected with the start of European Monetary Union that peer pressure would work, but it has not worked," says J?rgen Stark, the ECB's former chief economist, who spoke to TIME just hours after abruptly resigning his post on Sept. 9, panicking already jittery markets. Stark, Germany's top representative at the bank, cited personal reasons but the move was widely interpreted as a protest against the bank's policy of buying sovereign debt to prop up ailing euro zone economies. (See pictures of the global financial crisis.)
The sickest of these economies is Greece, a favored holiday destination among Germans, which has become something of a pariah among Frankfurters. "I'm fed up with working hard so the Greeks can sit in cafes and drink coffee with brandy all day," grumbles Uli, who hawks traditional beer steins to business-minded Frankfurt's rare tourists. "We're slaving while Greece parties," agrees Jens, a sausage vendor whose stand proclaims his product as "the best Wurst in town." He advocates letting the euro - and even the European Union - dissolve like fat on a griddle. At 28, he feels Germany "worries too much about history and too little about the future."
On the upper floors of Frankfurt's highrises, Germany's central bankers, financial chiefs and corporate masters understand how alluring that point of view can be, and why that means it's even more vital that Germany remain anchored in Europe. "The viewpoint from a German taxpayer's perspective is 'Why should I write a check to Greece if I don't know if the money will ever come back?'" says Martin Blessing, CEO of Commerzbank, Germany's second largest financial institution. "Germany underwent significant restructuring efforts over the last 10 years, which was tough. All our labor costs basically stayed the same, but in Greece they increased." Yet Blessing says this overlooks Germany's role as Greece's eager enabler. "We exported a lot of products to Greece. In effect we as an economy gave them a vendor loan. The exporter gives credit to the importer hoping that it will be repaid later."
A Greek default would put an end to those hopes for repayment - and has raised fears over the entire future of the euro. The common currency faces a dual threat: from weaker countries, who could choose to exit rather than undergo the painful, radical restructuring demanded of them, and from stronger nations such as Germany, who may opt out because the cost of staying in the currency threatens to outweigh the benefits of membership. But while the euro zone bailouts are onerous, membership still has great benefits in the form of a substantially weaker currency, which is essential to an exporting nation, and Germany's relatively robust economy is built on its exports, more than 40% of which go to other euro zone countries. The last thing Germany wants is to be lumbered with a strong currency, which it would undoubtedly get if the country tried to go it alone. "We have to think about what it would mean to exit the euro. What would happen in a scenario in which a reintroduced Deutschmark appreciated for example 30% within three months?," says Blessing. "How would that affect German exports and the country's workforce?"
That concern is shared by Isabel and Tobias Hahn, cousins who jointly run the family-owned Glasbau Hahn, a glassworks in the suburbs of Frankfurt. As an example of Germany's traditional small and medium-sized Mittelstand companies, it reflects the nation's economic strengths - and its vulnerabilities. The company makes display cases for museums - commissions have included the vitrines covering Tutankhamun's mummy in Luxor, Egypt and Abraham Lincoln's hair at Chicago's Museum of Science and Industry - as well as louvered windows and specialist glasswork. Only the third, and lowest-volume, group of products and services is aimed at the local market. Demand for museum glass has been up and down; after the doldrums of the 2008 financial crisis, a profitable 2010 has been practically erased by the Japanese tsunami and the revolution in Egypt, which caused the cancellations of substantial projects in both countries.
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Demand for louvered windows is holding up better. Isabel's father, who used to run the company initially resisted developing the product line which he thought too ugly. After pressure from clients he built a prototype to prove its aesthetic deficiencies and showed it at trade fair. It was a surprise hit. "My father always says, the bad ideas come up trumps and the good ones never work," she says.
That description might be also said to fit the single currency, although the directors of Glasbau Hahn still consider the euro a good idea that could and must be made to work. "If Europe slides back into individual currencies, then I don't believe it will be possible to maintain the continent's living standards or economic strength," says Tobias. (See why it's make up or break up time for the Euro Zone.)
Germany's labor market remains strong, with unemployment standing at 7%, but economic growth has stalled and government debt is mounting. Tensions in the governing coalition are worsening. After parliamentary elections in 2009, Merkel's Christian Democrats and Bavarian sister party the CSU formed a coalition with the Free Democratic Party (FDP), an economically liberal party that presents itself as the champion of the Mittelstand. The constellation was expected to be able to govern more decisively than Merkel's previous "grand coalition" with the Social Democrats (SPD). The opposite has proved true. Poor results in state elections have increased friction between the governing parties and dissidence within their own ranks. On Sept. 18, the FDP chalked up its worst result since World War II in the Berlin state election, losing its representation in the state parliament. Merkel's own party performed badly too.
If that weren't enough to instill extra caution in Germany's characteristically cautious Chancellor, there's the legacy of Germany's expansionist history to contend with. Gunther Hellmann, a political scientist at Frankfurt's Johann Wolfgang Goethe-University, says, "you instantly gather the connotations that come along in the German context when you're talking about 'F?hrung' - leadership." Hellmann says she's in a no-win situation. "If you take leadership, and tell others 'this is where we should go,' there will be outcry," He says. "If you proceed carefully, it's 'no leadership from Germany.'"
Ironically, if Merkel is to lead euro zone countries to safety, her first duty is arguably not to expand German sway but to cede further power to the European Union and to persuade other nations to do the same. "With the European Union, we Europeans have realized a dream for ourselves. We live in peace and freedom. That naturally entails giving up some powers to Brussels, which isn't always pleasant," Merkel told TIME in an interview at the end of 2009. "But it's necessary. The greatest consequence of globalization is that there aren't any purely national solutions to global challenges." She did not foresee how severe those challenges might be or how many powers she might be called upon to cede if the euro zone is to remain intact. It has become clear that the single currency can only work if there is a greater degree of fiscal and political union among its 17 members.
The break-up of the euro zone is a prospect so chilling to Washington that U.S. Treasury Secretary Tim Geithner traveled to Poland earlier this month to urge European finance ministers to step up their response to the crisis. "They recognized the need to escalate. They're going to have to put a much more powerful financial framework behind this," he told ABC News in a Sept. 26 interview. But although markets surged on Sept. 27 after a meeting between Merkel and Greek President George Papandreo amid talk of a new rescue plan, its outlines are hazy and dealt a blow to Merkel's chances of winning the Sept. 29 vote to ratify the existing plan as members of her government balked at the idea of heftier commitments further down the line. And any plan - whether it involves pooling powers or dipping deeper into pockets - will have to be ratified by national parliaments.
Stark, the ECB's outgoing Chief Economist, offers a deceptively simple prescription for breaking the logjam. "We have always made good progress in European integration when European politicians set targets and exact dates," he says. "This worked with the single market in 1993. There was a target to achieve the single market in 1993. And then with the single currency which started in 1999. So why not set new targets, be more ambitious?" His proposal: the 17 euro zone countries should "move ahead, leaving others behind" in the push for integration, perhaps appointing a joint finance minister. (See "Don't Let the Stock Market Rally Fool You: The Euro Hasn't Been Fixed.")
That's the sort of big idea that it's easy to deliver from above. On the streets of Frankfurt, it's a harder sell. "They say we have to save this," says Jens, the sausage seller, holding up a euro coin. "I say, Tell me how many of these it will cost me to save this. And they can't answer."
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Catherine Mayer is London Bureau Chief at TIME. Find her on Twitter at @Catherine_Mayer or on Facebook at Facebook/Amortality-the-Pleasures-and-Perils-of-Living-Agelessly. You can also continue the discussion on TIME's Facebook page and on Twitter at @TIME.
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